Please ensure Javascript is enabled for purposes of website accessibility

Why Yamana Gold, Inc. Stock Rose 53.6% in April

By Reuben Gregg Brewer - May 9, 2016 at 11:35AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Yamana Gold's shares rose with the price of gold but were helped along by a strategic acquisition, too.

What: Yamana Gold's (AUY 2.37%) shares rose by an impressive 53.6% last month. That was a lot more than the 30% or so advances that Barrick Gold and Newmont Mining posted in April.

So what: Since all three of these companies are precious-metals miners, you can't get away from the fact that gold and silver both advanced in April. That, then, is one of the main reasons this trio saw higher stock prices. But there's more going on at Yamana.

Yamana's costs for mining gold are fairly low. However, it's been having some trouble getting a pair of mines in Brazil to operate at expected levels. The company has been repositioning assets in an effort to deal with this issue, basically rolling a few mines into one division. It appeared that the goal was to sell off these assets, but that didn't work out as planned, and by the end of 2015 the company announced plans to keep the mines in house. Then, in April, Yamana completed the acquisition of another Brazilian mine that should help improve the prospects of its Brazilian operations.

The deal was a bit complex and involved some trade-offs on the copper side of the business. But CEO Peter Marrone explained it this way: "We will be significantly increasing potential future cash flow from gold for a modest reduction in future cash flow from copper." This bit of good news probably helped push Yamana shares a little higher than other miners.

Now what: With relatively low operating costs, Yamana looks well positioned for the precious-metals rally currently taking place. And the addition of the new mine in Brazil should help support a weak link. Investors looking for precious-metals exposure should take a look here. That said, Yamana has a number of projects in the works to expand its production. If any of these efforts don't live up to expectations, like the mines in Brazil, Yamana's outlook might not be as bright as hoped. Just something to keep in the back of your mind, based on the miner's recent history.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Yamana Gold Inc. Stock Quote
Yamana Gold Inc.
$4.76 (2.37%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.